Nokia Stock Still Looks Attractive Given Its New CEO and Likely Shakeup

Since my last article on Nokia (NYSE:NOK) about a month ago, shares have fallen about 17% to close at $4.14 yesterday. But I still believe Nokia stock is worth at least $6.74 per share.

Dark clouds over Nokia (NOK) brand name on top of a building in Helsinki, Finland
Source: RistoH /

I detailed in my last article how I came up with that target price. This target is now 63% higher than today’s level.

I am a firm believer that when you come up with a value for a stock and it subsequently gets cheaper, this presents a new buying opportunity. For most serious value investors this is a new way for them to average cost into the stock.

For example, my article showed that the company is likely to make $1.5 billion this year. If the company decides to restore its 5 euro cents per share quarterly dividend, this would cost only $1.42 billion. That is less than the expected free cash flow and makes it possible for the company to afford the dividend.

Therefore, I argued with a 20 euro cents (about 23.6 U.S. cents) annually, Nokia stock, at a theoretical 3.5% dividend, would be worth $6.78. This is because if you divide 23.6 cents by 3.5% you get $6.74 per share.

What Analysts Say About Nokia Stock

A poll of 10 analysts by Yahoo! Finance shows that they expect Nokia to make 34 cents per share in 2021. That puts Nokia stock at just 12.2 times earnings (i.e., $4.48 divided by $0.34 equals 13.2).

That makes Nokia stock cheap even on a forward earnings basis. One of the reasons why analysts like the stock is because the company is making good progress with its 5G telecom services products.

Nokia recently disclosed it has secured eight 5G deals. Raymond James analyst Simon Leopold believes that market sentiment will improve on the stock, according to Barron’s. This will happen as Nokia improves its 5G gear and it reaches the level of technology of competitors.

The analyst has a strong buy recommendation on the stock and believes that it is worth $5.50, or almost a buck and a half higher than today, a potential gain of almost 33%.

One of the reasons that Leopold likes Nokia is because the company has a new CEO, Pekka Lundmark, as of Sept. 1, along with a new CEO and a new board chairman. In effect, the core of management has turned over. The analyst believes they will focus more squarely on their customers and also deliver higher profits.

He feels that Nokia spent the last four years consolidating and focusing on integrating its 2016 Alcatel-Lucent acquisition. This took away time and energy for the company to specialize and perfect its 5G product lines like its competitors have done.

A recent Financial Times article on Nokia was even more critical about the company’s “strategic mis-step” and how it “messed up the start of 5G.”

What’s Next For Nokia Stock

The FT believes that Nokia is “vulnerable to attack” as either activists or a takeover offer could be possible. For example, the stock market value at EUR 24 billion is essentially the same as it was in 2013. this kind of performance attracts suitors who think they can do better.

Moreover, as I pointed out above and in my previous article, shareholders are looking for a resumption of the dividend. If the new management does not deliver on this and reposition Nokia in the 5G race, it could be open to this kind of takeover.

The FT article also points out that the new CEO is conducting a strategic review of the company. He may be looking to sell assets as analysts believe that the company is spread too thinly. One candidate is its patent and licensing division called Nokia Technologies. Other analysts even believe that a sale of its Alcatel submarine division could be possible. They also believe that its 100,000 employee roster is too large.

In essence, the new CEO may be acting as if the company is facing pressure to make drastic changes as it would if facing a strategic takeover. Therefore, expect good things to happen to Nokia stock, which I have shown which is deeply undervalued. It is worth at least 50% more than today’s price.

On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Mark Hake runs the Total Yield Value Guide which you can review here.

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